Federal audit finds city schools misspent stimulus, Title I funds

The Maryland State Department of Education may have to pay back up to $540,000 in federal money intended to help the state's poorest schools after a scathing audit found that Baltimore City was one of two school districts that misspent the funds, using the money for dinner cruises, makeovers and meals.

The report, reviewing grant expenses from 2009 and 2010, was conducted by the Office of the Inspector General for the U.S. Department of Education. It found similar misspending in Prince George's County schools.

The audit findings come as the city school system has been embroiled in controversy over financial mismanagement in the past year that became an issue as the city sought funding from the state legislature to fix its dilapidated infrastructure.

Among the inappropriate expenditures highlighted by auditors was $4,352 of stimulus funds and Title I dollars — which are designated for schools with the poorest populations — that two elementary schools used to pay for dinner cruises in Baltimore's Inner Harbor. According to the report, the cruises were said to be for parents and school volunteers and included more than a dozen staff members.

Republican state lawmakers called attention to the federal report Wednesday, saying it reveals that the state needs better and more detailed auditing.

"These dollars were supposed to put more teachers into our classrooms," said Senate Minority Leader E.J. Pipkin in a statement. "Instead, it's putting them into cruise ship dining rooms."

The audit also drew concerns from Democrats who said the spending was counter to the mission of the stimulus program.

"Obviously, no matter whether it's state, local or federal dollars, the taxpayers should know exactly where their money's going and exactly what it's spent on," said Del. Keiffer J. Mitchell Jr., a Baltimore Democrat. "I don't think when President [Barack] Obama set aside money to stimulate the economy and improve education that it was meant for a makeover."

In a statement, city school officials acknowledged the findings, saying that the district "provided revised guidance, training and support to district and school staff on federal grant guidelines" in the 2010-2011 school year.

District officials said $15 million of $112 million the city received that year was reviewed.

The statement also addressed the dinner cruises.

"Such parent recognition events are not allowable under federal grant guidelines because they are not explicitly linked to building parent capacity," said the statement, referring to school efforts to attract more parent volunteers. "Had these not been grant funds, the expenses would be considered acceptable as general fund expenses."

The auditors also called the $2,413 that the district spent on food for a parent-teacher association meeting "unnecessary and unreasonable."

According to the auditors, the money spent on fried chicken, potato salad, coleslaw, biscuits, cookies and soda for 28 attendees to discuss a school's budget averaged to $99 per parent, which far exceeded the federal government's $36 per-diem for meals at the time of the purchases.

Auditors highlighted an inappropriate $1,336 expenditure to take 30 people to a theater performance downtown that was described as a parent appreciation dinner and awards ceremony. It also included dinner, dancing and a performance by a local singer.

The report also found that the district inappropriately paid $500 for a catered "makeover day" for mothers and daughters at a local elementary school.

"A makeover day does not fit the requirement of a parental involvement activity, which is to improve student academic achievement," auditors concluded.

Auditors also questioned spending of grant money that is intended to be used to avoid reducing essential educational services. The district used $5,410 for entertainment, such as face painters, balloons and a steel orchestra, at a middle school fair.

"None of the expenditures were for essential activities or services ... or related to school reform, as stated in the purpose of the grant," auditors wrote.

There also was an instance where the system provided faulty and incomplete information.

The district reported that it spent $1,425 in Title I money to order food for 100 people for an activity at a school, but auditors said the sign-in sheet the district provided as supporting documentation only included 17 names. The district failed to provide other documentation, such as an agenda that specified the activity.

"As a result," the audit concluded, "we could not determine whether the activity, and therefore the food, was allowable."

The report is the latest in a series of financial missteps by the city school system.

Last year, investigations by The Baltimore Sun found that the district's credit card expenditures included a $7,300 office retreat at a downtown hotel and a $1,000 dinner at an exclusive members-only club, just months after the head of the IT department spent $250,000 to renovate his executive suite.

A state audit released late last year also faulted the district for failing to collect millions of dollars owed to the system, overpaying dozens of employees in salaries and benefits, and paying $2.8 million in overtime without substantiating hours. The district also paid contractors with no proof that they provided services.

In addition to the inappropriate spending, the U.S. Department of Education audit also questioned invoices for $296,430 paid to special education service providers that did not include a description of services provided or when the work was performed.

The federal auditors also concluded that the district had $249,754 of personnel costs that were not substantiated with the proper paperwork, such as time sheets or sign-in sheets. The district made 160 such payments to people though there was no documentation that they worked the hours they were paid for, according to the federal audit.

Republicans called for accountability that would include a possible repayment of the misspent money.

"The $99 fried chicken dinners?" House Minority Whip Kathy Szeliga said. "I was shocked at how they were spending that money. It's just not right."

In addition to strengthening guidance and oversight of grant funds, the federal audit recommended that the state Department of Education pay back $166,370 for expenses that broke federal rules in Prince George's and Baltimore, and either provide adequate documentation to support $373,643 in questionable expenses or repay whatever portion could not be documented.

In a response included in the audit, state officials said that $142,453 of the unallowable expenditures were allowable, and it could substantiate $369,981 of the expenses auditors found inadequately supported. State education department officials also challenged findings that were critical of its oversight role.

Auditors found that Prince George's County spent stimulus and Title I funds on items such as $8,376 worth of gifts for staff who attended a principals' meeting, a personal refrigerator and microwave for a budget administrator, and $108,882 for unapproved travel.

"We are aware of the draft audit report findings, and we have responded with our comments, and we remain engaged in a multi-step process that will continue for months to come," said Briant Coleman, spokesman for Prince George's County Schools.

Maryland State Department of Education spokesman Bill Reinhard said Wednesday that it was premature for the state to enact new rules addressing the concerns raised by the audit, which state officials received in January.

The state education department is awaiting the final findings after its response, Reinhard said.

The audit reviewed $15 million of $112 million spent by the city from April 1, 2009, through May 31, 2010, the district said. The federal government also reviewed quarterly data from July 2009 through June 2010.